Piero Puschiavo and Francesco Paravano were acquitted of the crime in a court in Bolzano, northern Italy, l'Adige reported on Tuesday.
They were accused of praising fascism after singing the Little Black Face song through a megaphone at an army event in 2012.
The 1935 song describes a girl found by Italian troops during their invasion of Ethiopia and describes how she will be taken back to Rome and paraded in front of Mussolini.
Puschiavo and Paravano, both 50, were reportedly let off because they sang the song in a “carefree” way.
Puschiavo is a member of the neo-fascist Tricolour Flame (Fiamma Tricolore) and as president of the group’s “National Project” to stop all immigration.
The court ruling came as Italy’s integration minister, Cecile Kyenge, began drawing up a law to remove all references to Italy’s National Fascist Party, Mussolini’s youth movement and the “Aryan race”.
Kyenge’s aim is to remove all discriminatory, racist and xenophobic terminology from the Italian legal system, Brescia Oggi reported.